Pakistan seeks billions in loans for ‘mega companies’ after floods

Pakistan will ask international lenders for billions of dollars in new loans to rebuild the country after catastrophic floods uprooted 33 million people and pushed its cash-strapped economy even closer to insolvency.

Prime Minister Shehbaz Sharif said Islamabad was not trying to reschedule its external debt, worth around $130 billion, but needed “huge sums of money” for ” mega-corporations” such as rebuilding roads, bridges and other infrastructure damaged or washed away in a flood scientists have linked to climate change.

“We are not asking for any measure [such as] a rescheduling or a moratorium,” Sharif told the Financial Times. “We are asking for additional funds.”

The Pakistani leader would not be drawn to the exact amount his government was seeking, but repeated the $30 billion estimate of damage from the floods, the worst natural disaster in the country’s 75-year history.

“There is a gap – and a very serious gap – that is growing day by day between our requests and what we have received,” Sharif said from his home in Lahore’s upscale Model Town neighborhood.

The prime minister also hinted that the international community’s failure to mobilize resources risked fueling political instability in the nuclear-armed state, where populist opposition leader Imran Khan is profiting widespread discontent.

Shehbaz Sharif: “We are only asking for climate justice, we don’t use the word reparations at all” © Betsy Joles/FT

Khan’s Tehreek-e-Insaf party won six of eight seats in by-elections held in three provinces on Sunday. Analysts said the results bolstered the ousted prime minister’s demand for a snap election.

“We are obviously worried because if there is discontent leading to deeper political instability and we are not able to meet our basic demands and objectives, this can obviously lead to serious problems,” said Sharif. “I’m not saying it in terms of a threat, but I’m saying there’s a real possibility.”

French President Emmanuel Macron has promised to hold a donors’ conference to boost Pakistan’s fundraising efforts. No date has been set for the conference, but Sharif said he expected it to take place in Paris in November. The UN is finalizing its own assessment of how much Pakistan will have to rebuild after the floods.

Sharif, younger brother of former Prime Minister Nawaz Sharif, took power in April after Khan lost a vote of no confidence. His government narrowly avoided a liquidity crisis by securing a $1.1 billion disbursement from the IMF in August as well as pledges of funding from China, Saudi Arabia and other bilateral lenders.

Pakistan has a long and tortuous relationship with the IMF, which has repeatedly urged the country to abandon unfunded energy subsidies that have cost the state dearly at a time of rising global prices.

Khan introduced a series of petrol and diesel subsidies in his final days in office, which Sharif’s government cut in June to control spending and mend fences with the IMF.

Map showing extent of flooding in Pakistan

Then, unusually strong monsoons this year submerged large swaths of the normally arid low-lying provinces of Sindh and Balochistan. The countryside remains criss-crossed with pools of stagnant water that cause skin diseases, malaria, dengue and other ailments.

Last month, the United Nations Development Program suggested Pakistan suspend debt repayments and seek to restructure its loans due to a “climate change-induced crisis”.

The devastation has also prompted environmental activists to call for “climate reparations” that would be paid for by wealthier countries with higher emissions to low-emitting countries that suffer the most from climate change.

However, Sharif said, “We are only asking for climate justice, we don’t use the word ‘reparations’ at all.”

Pakistani officials have not been shy about sharpening their case for international aid – and emphasizing their own efforts – at a time when Western countries face competing demands for emergency funds to cover soaring energy prices and support Ukraine’s defense against Russia.

The prime minister said Pakistan had dipped into state coffers to help displaced families and buy supplies such as tents, medicine, food parcels and drinking water.

Islamabad has been advocating for emergency aid in the international arena, including at the United Nations General Assembly and the Central Asia-Russia summit held last week in Astana, Kazakhstan. Sharif said Pakistan would also “seek additional funding wherever we can”.

“We are in a war against the devastation induced by climate change, and we have become a victim,” Sharif said. “Tomorrow another country can and we don’t want that to happen.”

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